4 Ways Physician Alignment Can Control Costs

Four Ways Physician Alignment Can Control Costs

October 2014

Controlling costs and maintaining quality in healthcare is an ongoing challenge. More than ever before, physicians and hospital leadership must align into a successful and supportive working relationship to succeed in the accountable healthcare era.

Higher quality care can also mean lower cost care, when implemented correctly. A well-constructed alignment strategy can empower hospitals and physicians to improve outcomes while controlling costs. But creating efficiencies and reducing costs isn’t just for operations, finance and supply chain leaders. There’s a significant role for both physicians and leadership in lowering supply costs, improving patient satisfaction, optimizing physician focus, and implementing co-management strategies.

Shared Supply Costs

In an aligned system, physicians are becoming more engaged in supply decisions, especially in cases where a change in device can affect patient care. Hospitals are partnering with their aligned physicians to lower costs for commodity products, reduce the number of vendors, and standardize equipment.

Organizations are finding further value by leveraging physician supply utilization data with suppliers. Analyzing clinical data along with details of supplies and processes can help healthcare organizations choose the best-performing medical devices and find new ways to reduce waste.

By partnering to manage the supply chain, hospitals reduce costs, physicians share in the savings, and most importantly, patients receive the same quality of care at a lower price.

Improved Patient Satisfaction Through Care Coordination

Care coordination among an aligned team can result in improved outcomes and reduced costs. When patients receive a higher level of care longer than they require, one of the consequences is inflated costs. When the appropriate treatment is provided at the right time in the proper setting, costly emergency visits, readmissions and errors can be avoided.

In addition, physicians who regularly engage their patients are less likely to prescribe duplicate tests or unnecessary treatment. Equipped with the knowledge and willingness to manage their own health and care, these patients experience lower medical costs than less engaged patients. Because these engaged patients are more likely to have better health outcomes, pathways to streamline the transition between different levels of care helps build patient satisfaction.

Finally, care coordination transitions – an area of focus in accountable care – can also reduce care costs. The average daily cost of ICU care is $1,600 – approximately $400 - $800 more per day than intermediate care, and nearly three times the cost of medical care.

Physician Focus

The American Medical Association (AMA) claims approximately 50% of physician's time is spent in non-revenue generating and non-clinical activities such as data entry, waiting, unnecessary movement, and redundant activities.

Significant cost reductions can be provided – without any sacrifice in quality and service – through a collaborative redesign of the way physicians are deployed. Many organizations enjoy noticeable efficiencies by helping physicians to focus on the clinical skills they are trained for, while realizing cost savings and greater professional satisfaction.

Many physician tasks can be done by non-physicians, such as advanced practice nurses and physician assistants, while 80% of non-physicians duties can be done online.


Co-management is a physician alignment strategy that places physicians at the leadership table with the hospital. When managed proficiently, physicians shift from seeing the hospital as a separate entity to considering the program to be their own. Often, this is their first impression of the budget and performance expectation realities facing leadership and administrative teams.

In co-management arrangements, a hospital typically buys the time of physicians and pays a performance bonus. The objective is to provide savings through operational synergies and greater throughput of patients, thereby realizing efficiencies in the costs of supplies, equipment, and staff.

Co-management can also increase patient satisfaction. Physicians in co-management arrangements are able to communicate easily with the other members of the care team. With the entire team focused on the patient's care plan, the patient is likely to be more satisfied with their experience.


As healthcare organizations adapt to new payment and care delivery models, physician alignment — the collaborative coordination between hospitals and physicians — can be a valuable method of cost reduction through shared supply costs, improved patient satisfaction, focusing physician roles and co-management. Once aligned toward common goals, patient outcomes should remain stable or even improve, while lowering costs for both organizations and patients.